TY - JOUR
T1 - Green innovation and firms’ financial and environmental performance
T2 - the roles of pollution prevention versus control
AU - Cheng, Qiang
AU - Lin, An-Ping
AU - Yang, Mengjie
N1 - Funding Information:
We wish to thank Ed deHaan (the editor), Aneesh Raghunandan (the referee), Seungju Choi, Shira Cohen, Jia Guo, Hayley Ma, Jeffrey Ng, Nancy Su, Albert Tsang, K.C. John Wei, Liwei Weng, Xi Wu, Liandong Zhang, and conference and workshop participants at the 2022 AAA Annual Meeting, 2022 MIT Asia Conference in Accounting, 2023 UTS Australian Summer Accounting Conference, 2023 Sustainability, ESG, and Accounting Conference, Hong Kong Polytechnic University, and Singapore Management University for their helpful comments. This research was supported by the Singapore Ministry of Education Academic Research Fund Tier 1 grant. Cheng acknowledges funding from the Lee Kong Chian Chair Professorship at Singapore Management University.Patents are commonly used to measure innovation because they capture the outputs of innovation (Glaeser and Lang, 2023). We start with the patent data in the KPSS database, which contains information on all patents filed by and eventually granted to firms covered in CRSP up to 2020.14 We extract each patent's patent number, filing year, grant year, and economic value from the database, and then use the patent number to obtain its CPC code from the USPTO.15 We are able to obtain most patents' CPC codes and match them with firms in Compustat using permco provided by the KPSS database.This appendix reports the total number of patents filed by and eventually granted to all firms covered in the updated KPSS database in each year over our patent measurement period (1997\u20132017) in Column (1), after merging with USPTO data for CPC codes in Column (2), and after merging with Compustat in Column (3).
Funding Information:
We wish to thank Ed deHaan (the editor), Aneesh Raghunandan (the referee), Seungju Choi, Shira Cohen, Jia Guo, Hayley Ma, Jeffrey Ng, Nancy Su, Albert Tsang, K.C. John Wei, Liwei Weng, Xi Wu, Liandong Zhang, and conference and workshop participants at the 2022 AAA Annual Meeting, 2022 MIT Asia Conference in Accounting, 2023 UTS Australian Summer Accounting Conference, 2023 Sustainability, ESG, and Accounting Conference, Hong Kong Polytechnic University, and Singapore Management University for their helpful comments. This research was supported by the Singapore Ministry of Education Academic Research Fund Tier 1 grant. Cheng acknowledges funding from the Lee Kong Chian Chair Professorship at Singapore Management University.
Publisher Copyright:
© 2024 The Authors
PY - 2025/2
Y1 - 2025/2
N2 - This study examines the effects of firms' green innovation on their future financial and environmental performance. If pollution is primarily a manifestation of wasted resources, then investments in pollution prevention technologies can both reduce the environmental impact of production and improve financial performance. In contrast, investments in pollution control technologies likely reduce the environmental impact of production without improving financial performance. Using green patents to capture firms' investments in these two types of technologies, we find that the value of a firm's pollution prevention patents is positively associated with its future financial and environmental performance, and that the positive impact on future financial performance is achieved through improvements in sales growth and cost efficiency. In contrast, the value of a firm's pollution control patents is not associated with its future financial or environmental performance. Overall, these findings shed light on the future implications of green innovation.
AB - This study examines the effects of firms' green innovation on their future financial and environmental performance. If pollution is primarily a manifestation of wasted resources, then investments in pollution prevention technologies can both reduce the environmental impact of production and improve financial performance. In contrast, investments in pollution control technologies likely reduce the environmental impact of production without improving financial performance. Using green patents to capture firms' investments in these two types of technologies, we find that the value of a firm's pollution prevention patents is positively associated with its future financial and environmental performance, and that the positive impact on future financial performance is achieved through improvements in sales growth and cost efficiency. In contrast, the value of a firm's pollution control patents is not associated with its future financial or environmental performance. Overall, these findings shed light on the future implications of green innovation.
KW - Environmental performance
KW - Financial performance
KW - Green innovation
KW - Pollution control patents
KW - Pollution prevention patents
UR - https://www.scopus.com/pages/publications/85196414160
U2 - 10.1016/j.jacceco.2024.101706
DO - 10.1016/j.jacceco.2024.101706
M3 - Article
AN - SCOPUS:85196414160
SN - 0165-4101
VL - 79
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1
M1 - 101706
ER -